Marriott International and Starwood Hotels and Resorts officially merged into one company on Friday, and the new Marriott has already made its first major decision: to give reciprocal benefits to members of each loyalty program
Almost a year after first announcing the merger agreement, Marriott International has completed its $13 billion purchase of Starwood. With the addition of Starwood’s portfolio, the new Marriott now has 30 brands with more than 5,700 hotels. That amounts to 1.1 million rooms in more than 110 countries, making Marriott the largest hotel company in the world.
Members of the Marriott Rewards program and Starwood Preferred Guest (SPG) were immediately able to link their accounts at Members.marriott.com to begin earning and redeeming points at all those hotels.
“We did want to deliver real benefits to our customers immediately,” Marriott CEO Arne Sorenson, who is leading the combined company, said during an interview with USA TODAY prior to the close. The two programs will remain separate while Marriott works on technology and product enhancements, Sorenson says.
The highly anticipated merger had a few starts and stops since the deal was reached in November 2015. A Chinese insurance consortium, Anbang, swooped in with a counter-offer that Starwood seriously considered for several weeks earlier this year. Anbang eventually dropped its bid. Then Chinese regulatory authorities, whose approval Marriott needed for the merger in order to operate properties in that coveted market, requested an extension of the review process.
Chinese authorities gave their final approval last week, clearing the way for the merger to be finalized.
Sorenson said the merger will more than double the company’s presence in such lucrative regions as Asia, the Middle East and Africa.
The alliance is the biggest hotel merger in years, but it is not the only one. InterContinental Hotels group acquired boutique chain Kimpton Hotels and Restaurants last year. AccorHotels purchased the Fairmont, Raffles, and Swissôtel brands this year. Destination Hotels and Commune Hotels have merged.
Many have likened the consolidation of the hotel industry to that of the airlines.
But Gray Shealy, executive director of the Master's of Hospitality Management Program at Georgetown University, says the Marriott-Starwood merger is likely to be less rocky.
“They’ve had tons and tons of time to prepare for it,” he says. “If anyone is going to do it as smoothly as possible it would be Marriott. Airline operations are so wildly different than hotel operations.”
David Loeb, senior hotel research analyst at Baird, says consumers will have a lot more options within the Marriott family, but perhaps not across the entire industry.
“It will be tougher and tougher for smaller companies to compete,” he says. “Consumers do like choice.”
With the merger, Marriott has acquired such luxury Starwood brands as St. Regis and W Hotels. Those will complement Marriott’s The Ritz-Carlton, JW Marriott, and EDITION.
Marriott will also inherit lifestyle brands such as Aloft, which will operate in the same category as Moxy and AC Hotels. The Marriott Hotels brand will co-exist with Sheraton.
Sorenson says he will retain the existing brands, even if they appeal to similar customers.
“We think we’re advantaged and our customers are advantaged by having more choice, not less,” he said.
That doesn’t mean Marriott won’t look to improve any brands. Marriott plans to "provide as clear a distinction as we can between the brands in terms of product and service so that our customers can have a sense of what each brand stands for," Sorenson says.
For instance, he said, Starwood's Element, an eco-friendly lifestyle brand, now has just 22 properties worldwide. Sorenson would like to see more growth there.
Another Starwood brand that needs some attention is Sheraton, he said.
“I suspect over the course of the next few years, we will work on strengthening the position of that brand and hopefully driving better returns for owners for all those hotels,” he said.
As for the loyalty program, Marriott has already made some decisions. The combined programs have 85 million members.
Members of both Marriott Rewards, which include The Ritz-Carlton frequent guests, and SPG will have their status matched. If they link their accounts, they will be able to transfer and redeem points at a three-to-one ratio. Three Marriott Rewards points will equal one SPG Starpoint. That will apply to redemption stays and the Marriott Rewards Experiences Marketplace and SPG’s Moments platform. Those programs allow members to redeem points for exclusive experiences, such as sporting events.
Loyalty program experts praised the initial execution.
"Marriott nailed it with their 3:1 transfer ratio,” says Gary Leff, a travel industry expert who studies rewards programs.
He says Starwood is also known for its better treatment of top guests, offering perks such as suite upgrades and fewer limits on complimentary breakfast.
“Until we know how Starwood’s best elite benefits and lifetime status will work, and whether the unique partnerships Starwood has forged with airlines like Delta, Emirates, and China Eastern survive the merger, members will continue to be in wait and see mode,” he says.
Loeb says he expects Marriott to “go out of its way to be very good to Starwood’s elite guests.”
“They will do all they can to engender loyalty across the family of brands,” he says. “I think that’s a very important strategic goal to them.”
Brian Kelly, founder of ThePointsGuy.com, says that as an elite member of both programs, he’s pleased so far with how Marriott is handling the merger of the programs.
“My biggest fear was that they were going to take benefits away or do a one-size-fits-all approach of Marriott is it,” he says. “They haven’t, at least not yet ….This merger is so big they don’t have to follow in the lead of airline mergers. And in the hotel space, there’s never been a hotel merger of this magnitude with these loyalty programs.”
Source: USA Today